The organization of supplier networks: Effects of delegation and intermediation

Dilip Mookherjee, Masatoshi Tsumagari

Research output: Contribution to journalArticle

52 Citations (Scopus)

Abstract

In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed.

Original languageEnglish
Pages (from-to)1179-1219
Number of pages41
JournalEconometrica
Volume72
Issue number4
DOIs
Publication statusPublished - 2004 Jul 1

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Keywords

  • Auctions
  • Collusion
  • Delegation
  • Hierarchy
  • Intermediation
  • Principal-agent
  • Procurement

ASJC Scopus subject areas

  • Economics and Econometrics

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